A third round of price-hike at fuelling stations in the UAE is in the pipeline and likely to take effect before the end of this year, a global think tank has said in its latest country report on the UAE.
“After two increases in the past five months, more rises in the price of petrol are in the pipeline before the end of the year,” Economist Intelligence Unit (EIU) has said.
The research firm adds that fuel prices at petrol stations in the UAE must go up by another half a dirham or so for local distributors to break even. “The break-even price for petrol stations is still at least 47 fils/litre higher than the current level after the two top-ups this year, which amounted to an overall increase of nearly 28 per cent,” the EIU report reckons.
After a gap of around five years, the UAE increased retail prices of fuel at stations in April this year for the first time since 2005. There have already been two increases in petrol prices in 2010 (April and July), which together have increased the price of petrol in the UAE by 35 fils.
With global oil prices hovering above $83/b and EIU estimating that a barrel of oil would average $80 for the year, UAE oil firms are incurring losses amounting to billions of dirhams every year. “The losses of oil marketing and distribution companies are estimated at about Dh3bn ($817m) just in 2009,” EIU estimates.
“The announced rise comes within efforts to gradually mitigate accumulated and growing losses these companies are sustaining due to continuous surge in cost of the product,” a statement issued by the UAE’s oil distribution companies in July, when they raised the prices for a second time this year, said.
The statement added that the companies were looking to gradually increase fuel prices, which are subsidised in the UAE, to get them on a par with international market rates.
According to Emirates 24|7 calculations local petrol retailers, which import refined fuel at international rates, lose at least 22 fils/litre, which does not include other costs, such as marketing, operations and transport.
“The losses were particularly acute in 2008, when oil prices reached record levels, but they accumulated again this year as prices crossed the $80/barrel mark,” the EIU confirms.
Analysts reckon that the petrol price increases and the expectation of more price rises by the end of the year may weigh on consumer sentiment and have created some inflationary pressure. “All commodities and services relying on fuel as a major input will see the cost of production and delivery rise,” the EIU says.
Emirates 24|7
